A Chance for Positive Change in North Korea

In business, one must always look at possible upsides. Even with all the dire predictions about what could happen in North Korea after the sudden death of its “Dear Leader” Kim Jong Il, this event could possibly pave the way for South Korean and foreign companies to make new inroads into the reclusive country.

The better-known sound bites about North Korea in the West are its nuclear program, its starving population, and above all, its unpredictability. But the lesser-reported fact is that in the last decade or so, there have been some encouraging signs that capitalism is slowly creeping in. There is a free economic zone in a border area near the demilitarized zone (DMZ) called Kaesong where South Korean companies have been allowed to employ North Korean workers to manufacture cost-competitive products for exporting. A major resort in North Korea was opened by Hyundai (but closed in 2008 after a shooting incident) to welcome over 2 million tourists from South Korea and elsewhere.

These ventures were undoubtedly motivated by North Korea’s pressing need to earn hard currency. Yet they also signaled that the country was experimenting with how to govern that communist state. China was also a die-hard socialist regime until it too began tinkering with capitalism in the 1980s, spearheaded by Deng Xiaoping. In fact, Kim Jong Il had been a frequent visitor to China in recent years, not only to scurry financial favors from its major ally but also to benchmark the economic reforms in that country. Similar reforms in North Korea, however, were scuttled whenever they conflicted with its domestic and external political or military agenda. This is because Kim belonged to the “old school,” and was trained by and responsible to the cold-war stalwarts in his party.

For the new regime in North Korea, the passing of Kim Jong Il might allow a “rebooting” of these commercial ventures absent the loss of face that it otherwise would have with Kim alive. That makeover could include the rebranding of North Korea that until now has strongly been perceived just as being a terrorist state, an image closely linked to its strongman. The son and his aides now have a window to adopt a more progressive picture.

Even though North Korea itself is one of the poorest countries in the world, its actions affect some of the biggest economies of the world. Instead of just taking a “wait and see” attitude about what happens there, policy makers and businesses should opt for a more proactive approach to promote positive change in that country.

Dae Ryun Chang is Professor of Business at Yonsei School of Business. Dae Ryun has launched a MOOC course “International Marketing in Asia” on Cousera.org. Follow him on Twitter at @daeryun.

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